Wednesday, January 18, 2012

The Contact Energy Ltd [CEN.NZX] share price has bounced around like a cheap K'Rd hooker for the last 5 months and yesterday reached a 5 month low of $4.88.

The CEN share price had support and these levels 5 months ago and rose from a 52 week low of $4.82 on August 9 to $5.50 on the 22 September 2011. An approximate 14% rise. Well, over almost over the same time-frame the share price has done almost the mirror opposite going from $5.52 on 2 December 2011 to finish at the aforementioned $4.88.

The share price drop of around 13% over the last 6 or so weeks appears to be because the margin the company is getting for retailing their electricity has reached -7% in the month of November. They have increased customer numbers every month since introducing a 22.5% discount for early payment of accounts in August but this has of course led to obvious retail losses. October data indicated a-2% retail margin.

December operational data is out next week so it will be interesting to see which way the margin falls for this period.

The company is doing OK in terms of generation volumes and prices received for that generation so I see the share price fall as a little overdone.

The current share price is good value for this company and anything around these levels is a good buy.